Question 1

What is interim financing in Florida real estate?

Accepted Answer

Interim financing (also called bridge financing or gap financing) is a short-term loan that provides funds during a transitional period before permanent financing is secured. In Florida real estate, interim financing is commonly used for: construction loans (funding construction until the project is complete and permanent financing replaces the interim loan), bridge loans (allowing a buyer to purchase a new home before selling their existing home), land acquisition loans (financing land purchase before development financing is arranged), and renovation loans (funding property improvements before refinancing into a permanent mortgage). Interim loans typically have higher interest rates and shorter terms (6-24 months) than permanent financing.

Question 2

How does interim financing work for Florida construction projects?

Accepted Answer

Florida construction interim financing follows a draw schedule: the lender commits to a total loan amount based on the project budget and appraised value upon completion. Funds are disbursed in draws (installments) as construction milestones are completed. A construction inspector verifies each milestone before the draw is released. Interest accrues only on the disbursed amount. Upon project completion, the interim loan is either paid off by the permanent loan (a construction-to-permanent loan conversion) or refinanced into a new permanent mortgage. Florida construction liens (Chapter 713) create additional complexity, requiring lien waivers and proper notice procedures before each draw.

Question 3

What are the risks of interim financing in Florida?

Accepted Answer

Key risks include: higher interest rates (interim loans are priced higher due to shorter terms and higher risk), maturity risk (if the permanent financing falls through, the borrower may not be able to repay the interim loan at maturity), construction risk (cost overruns, delays, or contractor defaults can exhaust the construction budget), market risk (if property values decline during the interim period, the permanent loan may not cover the interim loan balance), and interest rate risk (if permanent financing rates rise during the interim period, the permanent loan may be less favorable than projected). Borrowers should have a clear exit strategy (permanent financing commitment or sale) before entering interim financing.

Interim Financing

Interim Financing in Florida Real Estate

Common Uses

Construction Draw Process

Risks

Related Terms

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